Staking is defined as the process of holding funds in a cryptocurrency wallet to support the operations of a blockchain network.
In particular, staking represents a bid to secure a volume of crypto to receive rewards.
In most case however, this process relies on users participating in blockchain-related activities via a personal crypto wallet.
The concept of staking is also closely tied to the Proof-of-Stake (PoS). PoS is a type of consensus algorithm in which a blockchain network aims to achieve distributed consensus.
This notably differs from Proof-of-Work (PoW) blockchains that instead rely on mining to verify and validate new blocks.
Conversely, PoS chains produce and validate new blocks through staking. This allows for blocks to be produced without relying on mining hardware.
As such, instead of competing for the next block with heavy computation work, PoS validators are selected based on the number of coins they are committing to stake.
Users that stake larger amounts of coins have a higher chance of being chosen as the next block validator.
Staking Explained
Staking requires a direct investment in the cryptocurrency, while each PoS blockchain has its particular staking currency.
The production of blocks via staking enables a higher degree of scalability. Moreover, some chains have also moved to adopt the Delegated Proof of Staking (DPoS) model.
DPoS allows users to simply signal their support through other participants of the network. In other words, a trusted participant works on behalf of users during decision-making events.
The delegated validators or nodes are the ones that handle the major operations and overall governance of a blockchain network.
These participate in the processes of reaching consensus and defining key governance parameters.
